If the Devil of the WTO IP Waiver Is in the Details, What Are the Details?

By Kevin E. Noonan --

While the details of the WTO patent waiver have not been determined (or more properly negotiated), it is important to consider the structure of the international trade regime in which the waiver will operate and the consequences of any agreement defining exactly what will be waived.

The GATT/TRIPS agreement is a treaty, which (of course) is an agreement between countries, and disputes and accommodations are between their governments.  The extent to which a private company's patent or other IP rights are protected under the terms of these agreements depends on actions of these governments in enforcing them on the company's behalf.  Thus, for protections like patents, a government can agree to "turn a blind eye" to infringement by companies in other countries (or other governments) by refusing to press the rightsholder's case before the WTO, to pressure the governments unilaterally (as in the Watch List and Special Watch List of the U.S. Trade Representative's Special 301 Report), or otherwise support a private company's private actions using an infringing country's legal system.  Such "passive" actions (i.e., refusing to enforce rights in violating or "scofflaw" countries) requires very little affirmative action by a government.  These are the types of de facto waivers that can be effective, for example, for patented drugs that can be produced by conventional drug production technology wherein description of an active pharmaceutical ingredient molecule.

The details of COVID vaccine production have been set out in various news sources (see Neuberg et al., "Exploring the Supply Chain of the Pfizer/BioNTech and Moderna COVID-19 Vaccines"; Weiss et al., "A COVID-19 Vaccine Life Cycle: From DNA to Doses," USA Today, Feb. 7, 2021; King, "Why Manufacturing Covid Vaccine to at Scale Is Hard," Chemistry World, Mar. 23, 2021; Cott et al., "How Pfizer Makes Its Covid-19 Vaccine," New York Times, April 28, 2021).  But these are certainly not disclosed in the detail necessary for commercial production, and the complexities of production are illustrated in graphics from the Times article, wherein the DNA is prepared in Chesterfield, MO and shipped to Andover, MA for mRNA production; then the mRNA shipped back to Chesterfield or Kalamazoo, MI for packaging into the vaccine nanoparticles; and then sent back to Andover for testing before release.  While some of this complexity may be company-specific, it also represents the different technological requirements for preparing an effective vaccine.  It is unlikely that most of the countries in favor of the waiver (except India and South Africa) have the technological infrastructure for producing the vaccine.  And the company in India, the Serum Institute ("the largest vaccine maker in the world"), having the greatest likelihood of being able to reproduce the vaccine if the waiver is put in place recently was forced to "hand over its vaccines to the [Indian] government," according to an article in the New York Times (Schmall et al., "India and Its Vaccine Maker Stumble over Their Pandemic Promises," May 9, 2021).

It is evident that, in the almost total absence of patents involved in COVID vaccine preparation, the disclosure needed to reproduce these vaccines (no matter how difficult that may be in practice) are protected by trade secrets.  If the WTO imposes this waiver, the question will be whether the U.S. will compel disclosure of trade secret owned by U.S. companies, or have disclosed them to the extent such secrets are part of regulatory filings.  Either action would constitute a "taking" under the Fifth Amendment ("Nor shall private property be taken for public use, without just compensation"); see Epstein et al., "The Fifth Amendment Takings Clause," Interactive Constitution: Common Interpretation.  Seemingly simple and straightforward, almost every word in the clause is open to interpretation, none perhaps as much as determining what "just compensation" entails.  It is likely that, should the government act peremptorily with regard to takings of trade secrets justified by any WTO waiver clause, the effect on trade secrets will carry the greatest consequences and be the cause of most controversy.  Indeed, the prospects arising therefrom are likely some of the biggest impediments towards effectuating any waiver in a manner that could have any chance of achieving the stated goal of facilitating COVID vaccine production.

This prospect also raises the issue of how any such waiver will be implemented in the U.S. Treaties are not necessarily "self-executing" and need to become enforceable through an Act of Congress.  The distinguishing feature of such treaties are that "provisions in international agreements that would require the United States to exercise authority that the Constitution assigns to Congress exclusively must be deemed non-self-executing, and implementing legislation is required to give such provisions domestic legal effect."  See Mulligan, "International Law and Agreements: Their Effect upon U.S. Law," Congressional Research Service 7-5700, Sep. 19, 2018.  The necessity for Congress to act, although not having the heavy weight that entails approving treaties (i.e., a two-thirds majority vote in the Senate) nonetheless could be expected to face significant opposition should it be interpreted to permit the government to exercise a form of "eminent domain" over pharmaceutical companies' trade secrets.  In this regard such an act could readily be characterized as "forced technology transfer" and even IP theft, should, for example, such trade secrets be capable of use to weaponize rather than immunize against viral infections.

The administration's public position raises the likelihood of an infringement on private property unprecedented in the U.S.  It also has implications for other aspects of foreign policy; for example, at least some of the trade secrets belong to BioNTech, a German company.  Germany has not agreed to the waiver, and should the U.S disclose BioNTech's trade secrets, no doubt Germany would have cause to seek redress against America.  This is but one of the possible legal consequences that the recent capitulation to the purported global "kumbaya" of the WTO waiver is likely to create.

More complications will likely arise as the negotiations proceed.  Provided the Administration is properly advised and the waiver properly limited (e.g., to patents) these and other deleterious consequences may be avoided.  In view of the possibility of serious liability arising by improvident acquiescence to generally uninformed calls for a broad waiver, it might not be a bad idea for all those involved in innovation (universities, technology transfer offices, pharmaceutical companies, patent lawyers, and economists) counter these opinions with the facts and make their viewpoints known and voices heard.

Comments

[Greg DeLassus]

“It is unlikely that most of the countries in favor of the waiver (except India and South Africa) have the technological infrastructure for producing the vaccine.”

It is unlikely that even India & South Africa have the technological infrastructure necessary to produce any of the approved COVID vaccines. Just because one has the machinery necessary to produce *some* vaccines does not mean that one has the machinery necessary to produce *these* vaccines. None of them—neither the mRNA vaccines of Pfizer & Moderna nor the adenoviral vectors of J&J & AstraZeneca—are like *any* other vaccines that has ever been approved for human use. IN & ZA have infrastructure for making MMR, or DTAP, or seasonal flu vaccines, but the various approved COVID-19 vaccines are different kettles of fish entirely.

[Mark Summerfield]

I don't think the mooted waiver has anything to do with compelling WTO members to suspend any patent enforcement rights within their territory, much less to force any company to divulge trade secrets.

What TRIPS does is to set minimum standards for protection of IP rights by member states. Failure to meet those minimum standards exposes a country to formal complaints by other members, and potential sanctions. A waiver would make sanctions unavailable in respect of failure to protect IP rights falling within whatever parameters are agreed through negotiations.

This would presumably mean that countries such as India and South Africa could authorise manufacturers to produce COVID vaccines regardless of the existence of relevant patent rights, and bar the patentees from enforcing those rights.

Of course, they can do this without a waiver, via compulsory licensing provisions (that are permitted under TRIPS). Chile and Israel have already done so. But perhaps the terms of a waiver would free them from the obligation to compensate the patentees, making the process simpler and cheaper.

You also have to wonder whether any country would pursue sanctions against a poorer nation for manufacturing COVID vaccines in breach of patent rights during the pandemic. It doesn't seem very likely.

So is all the talk about waivers just a lot of hot air, lobbying by the usual anti-patent suspects, and/or "virtue signalling" by some nations and organisations that have come out in support? Who knows...

[LUCA FALCIOLA]

For those interested to published patent applications and granted patents already disclosing technical information about Covid-19 vaccines and anti-Sars-Cov-2 antibodies, I will make a presentation at PIUG2021 on May 27th.

[Joshua Sarnoff]

If the patents are not limiting vaccine R&D, clinical trials, or production, then the waiver is harmless unless and until they do so. (Compare Pfizer's unauthorized use of mNeon Green, which didn't stop Pfizer from using it and now they are just opposing compensation to the patent holder.) So it seems like the opposition to the patent waiver is misguided and unduly strident. Particularly as the waivers do not disclose anything that is not already public. (Whether they should disclose sufficient information for at-scale production is a discussion for a different day.) And since trade secret waivers (actually compelled transfers) would likely be considered a taking that requires compensation, (see Monsanto v Ruckelshaus) again it seems like the opposition is unjustified and unduly strident. Unless the point of opposing the waiver is precisely to prevent manufacturing scale-up of needed vaccines, as opposed to uncompensated scale-up. Similarly, objections about liability for inadequate production seem wholly unjustified, as any such compelled transfers will not create any liability for the current trade secret holders, and in any event that is what we have regulatory authorities for which to assure safe production.

[Ben Borson]

If the government funded the research and development of these vaccines, the public should have a say in how the vaccines are made and distributed, including something like compulsory licensing, which many other countries have. In situations like this pandemic, having numerous producers will be helpful. Even if trade secrets are needed to make a particular vaccine, sharing those secrets with IN or ZA, or other capable manufacturers’s countries serve the public.

Herd immunity cannot be created on a country-by country basis. World-wide immunity is required.

[Kevin E Noonan]

Josh: on one level you are correct, that this may have no practical effect depending on how it is implemented. Philosophically it is problematic to abandon time-tested working IP principles based on panic, for a policy that won’t actually improve global vaccine accessibility.

But the point here is choice: the innovators disclosed their trade secrets to government regulators under a promise that the government would not give their technology away. There may be no measure on compensation sufficient to permit competitors in future from using this technology for more than just COVID; once the genie is out of the bottle it won’t go back in.

And as a consequence once again the government’s actions are incentivizing behavior that hides the “secret sauce” of how inventions are made, the antithesis of the disclosure intention of the patent system.

There are ways to produce and deliver the ~6-7 billion doses needed for global vaccination. Not only is this not one of them but it promises to make addressing effectively the next pandemic harder and less likely.

[Kevin E Noonan]

Well, Ben, if the government invested $1 million, and the companies expended $1 billion, do you still feel the same way?

[Dan Feigelson]

Mark Summerfield's comment about Israel exercising compulsory licensing provisions in its patent statute is misleading, in that his statement implies that Israel exercised these provisions with respect to a vaccine. That's not the case; Israel paid a premium for Pfizer vaccines (about $30/dose), and Pfizer benefited handsomely from the data obtained by what was effectively a huge-scale trial using millions of patients. Additionally, as far as I know, there are no patents in Israel that specifically cover the Pfizer vaccine. There are several pending BioNTech patent applications that might cover the vaccine, but of course "pending" is not "granted".

The compulsory licensing in question concerned Abbvie's drug Kaletra, which was identified in early 2020 as a possible treatment for COVID-19. In the end (a) Abbvie offered to make it available to all countries, and (b) it wasn't adopted as a therapy. Moreover, it was well-understood by the Israel government lawyers that Abbvie would need to be fairly compensated. I blogged about these issues at the time here:
https://www.iliplaw.com/americaisrael_patent_law/2020/03/israel-makes-first-use-of-statutory-provision-allowing-patent-infringement-by-state.html
and here:
https://www.iliplaw.com/americaisrael_patent_law/2020/03/a-few-more-thoughts-on-israels-exercising-its-right-to-exploit-abbvies-patents.html
and here:
https://www.iliplaw.com/americaisrael_patent_law/2020/03/abbvie-to-suspend-enforcement-of-kaletra-patents-maybe-probably-unrelated-to-israel.html

[Kevin E Noonan]

Thanks, Dan, for the clarification

[Profesor Joshua Sarnoff]

Kevin, it is highly unlikely that any company can "hide the secret sauce" in the future, if disclosing it is a condition of regulatory marketing approval. The concern about inadequate compensation exists, but it would be no less a concern for a compulsory license, which is fully legal. We just don't usually order compulsory licenses of trade secrets, only of patent rights. And no doubt you or someone else could litigate very well the reasonably expected value of the loss of trade secrecy. Which is a win for lawyers, as well as the public (which does not necessarily exclude lawyers). Josh

[skeptical]

Three different angles:

Has not been done.

Cannot be done.

Should not be done.

For some reason, certain folks still seem to be confusing these things.